The IRS finally provides overdue guidance on state stimulus checks

Most taxpayers in the 21 states who sent stimulus checks or tax cuts in 2022 do not need to pay taxes on those payments on this year’s federal tax return, the Internal Revenue Service announced Friday evening.

The guidance clarifies how taxpayers should treat these payments and allows those waiting to apply to move forward. It also means that, for the most part, those who live in the affected states and have already filed their taxes don’t have to change their returns.

The agency said it will not “question the taxability of payments related to general welfare and disaster relief,” so taxpayers who received payments from the following states do not have to report them on their 2022 federal tax returns:

  • California

  • Colorado

  • Connecticut

  • Delaware

  • Florida

  • Hawaii

  • Idaho

  • Illinois

  • Indiana

  • Maine

  • New Jersey

  • New Mexico

  • New York

  • Oregon

  • Pennsylvania

  • Rhode Island

Alaska is also included in this group, with the exception of those who received Alaska’s permanent fund’s annual dividend payment. This is considered taxable income on federal tax returns, the filing said. Any other payments that states have provided as compensation for workers are also federally taxable.

According to the IRS, taxpayers in Georgia, Massachusetts, South Carolina and Virginia who also received payments don’t have to report them on their 2022 federal tax returns if they meet the following criteria:

  • The payment is a refund of state taxes paid, and

  • Either the taxpayer claimed the standard deduction or they itemized their deductions but did not get a tax benefit.

The IRS has not provided guidance for taxpayers who don’t meet these requirements, whose payments are still federally taxable, and who have already filed federal income tax returns.

IRS building in Washington DC.  Please see my portfolio for more travel and tax related images.

IRS building in Washington DC. Please see my portfolio for more travel and tax related images.

The determination comes nearly three weeks into tax filing season and after millions of Americans have already filed their federal returns. A week ago, the IRS recommended taxpayers in those states that sent payments to withhold filing, a situation the agency’s watchdog called “not acceptable.”

The agency appeared to acknowledge the stress caused by the oversight.

“The IRS appreciates the patience of taxpayers, tax professionals, software companies and state tax administrators as the IRS and the Treasury have worked to resolve this unique and complex situation,” the IRS release said.

Rebecca is a Yahoo Finance reporter. Janna is the personal finance editor for Yahoo Finance. Follow her on Twitter @JannaHerron.

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